Thoughts on Networked Businesses

Posted by Admin Admin on Wednesday, May 2, 2012 Under: Entrepreneurship
I have had some experience in trying to build networked businesses.  I have learned many lessons the hard way.   Growing quickly sounds better to investors than to the sponsors and revenue sources who you will depend upon to build your business.  As a result, though VC's tend to love these types of networked businesses - the VC math of generating a high internal rate of return on their investments is not perfectly aligned with the go-it-slow / measured approach of major sponsors. 

I view these networked businesses and particularly those that are media based to be potentially very valuable platforms.  So here are some quick thoughts to some friends who have recently asked for my insights on networked businesses.

a) looking at regions or markets where you can dominate and saturate the marketplace.  Ideally - seek to suck all the oxygen out of the room with how powerful your solution may be.   It doesn't have to scale nationally to scale dramatically first at a local level.     National sounds better than it is.  In fact, both Facebook and Groupon had early success and value creation not because they were national, but because they saturated markets and could deliver them for advertisers.

b) think carefully about who your customer is - in our college media business they were colleges and universities  / but sponsors are really the customers who pay you.   Therefore, consider identifying the vital partners and approach them as "investors" in media - treat them that way.  Help them imagine what the world would be like if your model and marketplace was successful.  

c) If you are building a media or marketing services network, Seek to provide 3 - 5 national category sponsors a heavily discounted rate if they will commit to a multii-year (with service requirements built in) so that the sponsors are paying effectively a competitive rate today, but the same rate over 3 years will appear even more discounted and they will look even better as the network get's built.   The reality is your network requires the infrastructure to be built - you have to build the network to scale and that requires big brands to believe in it.

d) most of all - be mission focused.    Ideally your solution or networked business should create value beyond the users you serve but should create extra value to your users, customers or other third parties that may benefit from the networked value - in our college media business the extra value we created were for newspaper editors and writers who could share content that would have otherwise remained un-networked,   For our advertisers they could target larger pools and of networked subscribers where they had not been available without the network.    For other sponsors, the college media business created the infrastructure to digitally deliver not just content, but personalized promotions and ads that had otherwise been unavailable to them.  In short, the value created is not always obvious - but the benefits can be seen as the network grows.

The real value, as a result, is that the network grows and creates dependence in the lives of users, customers and clients.   This is where value creation scales quickly and where everyone benefits - more than investors - but all the users you seek to serve.   As a result - the most important insights is to remain MISSION focused - and to not worry about the value of your business as much as the value you are creating for your users.

In : Entrepreneurship 

Tags: networked businesses   
Letter_Birmingham_Jail.pdf Letter_Birmingham_Jail.pdf
Size : 244.4 Kb
Type : pdf

About Me

John Fees John Fees is an entrepreneur, strategic marketing executive and business leader in the fields of affinity, collegiate and partnership marketing. During the course of his career, John has founded and led successful companies specializing in strategic marketing and media, affinity, partnership marketing and financial services. Currently, he serves as the co-founder & managing director of NGI Group. NGI Group is a large shareholder in portfolio companies including GradGuard, MassDrive & MyLifeProtected.